GOP and the Economy

(NECN: Peter Howe, Cambridge, Mass.) From tax policy and health care to regulation of energy and financial services, Tuesday's election means come January, the people in charge of one side of Capitol Hill will have very different economic and business approaches and priorities from the current leaders.

But there is likely to be a big gap between what House Speaker-apparent John A. Boehner and his Republican majority want -- and what they can actually do.

Speaking to reporters Wednesday morning, Boehner said extending the George W. Bush-era tax rates, for people at all income levels, is a key priority. "We continue to believe that extending all tax rates for all Americans is the right policy for our economy at this time.'' Barring legislative action, tax rates will rise January 1 as they revert to the Clinton-era rates following tax reductions Bush spearheaded in 1993.

Tax changes are likely to happen, and probably sooner rather than later. David King, a congressional expert at Harvard's John F. Kennedy School of Government, said, "It would be a huge surprise if the Bush tax cuts are not extended during the lame-duck session" of Congress that will begin in the middle of this month before the next Congress takes office in early January. Every two years King runs a week-long bipartisan class in how Congress works for newly elected members. He is doubtful that Mr. Obama can resist the widespread Republican -- and some Democratic -- pressure to stave off a tax hike Jan. 1, even if that means the president backs off his opposition to keeping tax rates where they are for families earning over $250,000 annually.

"In order to get it passed through the Senate, they'll have to pass the full Republican tax package,'' King predicts.

Also on House Republicans' agenda: repealing, or at least de-funding, the president's sprawling health care law. Boehner said, "I believe the health-care bill enacted by the current congress will kill jobs, ruin the best health care system in the world, and bankrupt our country. So that means we have to do everything we can to repeal this bill and replace it with common-sense reforms.''

In addition to big issues like tax cuts and the fate of Obamacare, you can also expect Washington Republicans to push starting in January for new directions in other areas -- like energy. more conventional, less government-subsidized green. Ticking off a list of areas where he thinks Democrats need to move towards compromising with Republicans, Senate Republican Leader Mitch McConnell of Kentucky conspicuously included "nuclear power and clean-coal technology" in a list that included tax and spending reform.

But given that House Republicans still face a Democratic-controlled Senate, and don't have enough votes to override President Obama's vetoes, how much can they -- really -- get done?

"Congress in general has very little power when it's divided government,'' Harvard's King says. "It's clear that president Obama will be happy to exercise the veto if the Republicans in the House go too far in one direction or another.''

Predicts King: "We're going to be in an era of gridlock.''

And notably, one area that quickly moved towards gridlock Wednesday was national energy policy, where President Obama basically abandoned the so-called cap and trade energy bill now in the Senate, something Republicans and some coal-state Democrats have blasted as "cap and tax" and kept bottled up in committee. Mr. Obama said he will look for "other means" of creating financial incentives to reduce pollution. And on health care, the president said he was willing to listen to Republican ideas for improvements to what's been passed -- but not to "re-litigate"that law.

With videographer Christopher D. Garvin